KordaMentha blasts ‘primitive’ response to housing affordability

Industry players have indicted the federal government as having “no interest” in solving declining housing affordability for young Australians.

Paul Mirams, partner at advisory firm KordaMentha, delivered a scathing review of the federal government’s response to housing affordability in Australia, describing the government’s response to foreign investment activity as “the most disappointing thing” about discussions occurring around housing affordability.

He was speaking at a property forecast event held by S&P on 3 August.

Mr Mirams said: “When you’ve got 50 per cent of all new stock bought by people who don’t live here, the government’s response has been pretty primitive. They put up taxes. They just saw it as a revenue opportunity; they have no interest in solving the problem. They have an interest in raising money.”

Labelling rising house prices as a “social issue that won’t go away”, Mr Mirams said that he expects stamp duty to increase on foreign investment as the government will see it as a way to tax people who are happy to pay.

But he highlighted that it does not solve the problem. "It actually just makes property more expensive and makes the issues around affordable housing worse.”

Pointing to the HILDA survey released this week which revealed that in 2014 only 25 per cent of Australians between 18 and 39 years of age owned a home (down from 36 per cent in 2002), Mr Jarvis said that it’s time to “stare reality in the face” and consider different ways of improving housing affordability.

“That’s something we need to think about how we might address . . . affordable housing,” he said.

“We're a gateway city in Sydney and a lot of the established gateway cities overseas, the levels of entitlement around home ownership are much lower than they are here, and I think there's a transition underway along those lines that we need to be mindful of.”

An emerging sector

Looking ahead, Mr Jarvis said that banks could be asked to respond to social and affordable housing issues in new ways, and added that the multi-family development sector was likely to mature in coming years.

“The multi-family sector—being a developer building a whole block of apartments to be rented out to a generation of renters—is emerging [for] the 18–39-year-olds, the build-to-rent model.”

Increasingly, banks will need to look abroad for lending inspiration, he predicted, and particularly follow in the footsteps of the UK.

“Following precedency in the UK around shared ownership is, for example, allowing someone to purchase 30 per cent of the property and then getting subsidised rent across the other 70 per cent. There might be stair-casing in the way that people acquire a property so that 30 per cent could graduate to up to 50 and then subsidise from there.”

Adding that interest-free loans could be an option, Mr Jarvis said that the rise of the affordable housing sector would “usher in” new players, including industry members with greater, and potentially offshore, experience.